Amazon TACoS: What Is It and Why It Matters To Advertisers
Amazon TACoS is one of the latest “buzz” metrics in sales and advertising conversations the past few months. But what does it mean exactly? And how does TACoS relate to organic sales? Can it help brands achieve long-term growth on the Marketplace?
We spoke with our own experts to find out.
What is Amazon TACoS?
Total Advertising Cost of Sale also referred to as TACoS measures advertising spend relative to the total revenue generated.
The term (now popular in the Amazon advertising space) may provide better insight into the long-term growth of a brand.
Here’s how Courtney Macfarlane, Senior Analyst, Marketplace Search at Tinuiti explains it:
“With advertising we’re increasing the sales velocity for a particular product. By increasing sales velocity, we’re also impacting organic sales. Therefore, investing in advertising can help grow organic sales in addition to ad sales. Looking at TACOS in addition to ACOS gives you a more holistic view of how your ad spend is affecting overall sales. If your ultimate goal is to grow total sales, you might want to accept a higher ACOS in the short term to really increase sales velocity and improve your TACOS in the long term.”
Increasing vs. Decreasing TACoS
- TACoS is increasing – This indicates you’re investing more in ad spend, but you’re organic sales are not increasing at the same rate.
- TACoS is decreasing or flat – This indicates the product being advertised is generating strong or steady sales. It also suggests that organic sales are improving, which ultimately means your brand awareness is growing too!
- TACoS and ACoS are both increasing – Although not ideal, there are some situations when this makes sense. If you launch a new product, the main objective is increasing sales. Over time, TACoS should begin to decrease as organic search for the brand / product improves.
- ACoS decreasing while TACoS is increasing – Of the four options listed, although this rarely happens this indicates that your organic sales are actually decreasing (or becoming a smaller portion of your total revenue). Ultimately, this is shifting brands away from their long-term goal – which is to increase organic sales and become less dependent on paid advertising as the only driver of sales.
“We calculate TACoS for a successful supplements vendor. Although the ACoS is high, we are only operating at a 20% TACoS. As long as we maintain the TACoS goal, this vendor will continue to grow their brand awareness and improve their organic sales,” Macfarlane says.
“A lot of my clients use TACOS as a metric for success along with ACoS. Ultimately, TACoS provides a big picture view of the account and also helps us figure out what we should be doing to improve our long term strategy. Especially for Amazon Sellers, I include TACoS in my reports often.”
To learn more about how TACoS can improve your long-term strategy, email [email protected]
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